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How does the "no soup" provision work in legal terms? How do you (pg and co) ensure you don't get diluted in future rounds?
by Kliment 17y ago
How does the "no soup" provision work in legal terms? How do you (pg and co) ensure you don't get diluted in future rounds?
- pg 17y agoWe have protections against arbitrary dilution, by e.g. issuing extra stock or doing a new round that values the company at $1. We've never needed them. What I meant by the "no soup" remark was that we don't care that much about legal protections; it is a more powerful deterrent that we would blacklist any VC who screwed us over-- or who screwed over any of the startups.
- Kliment 17y agoThat in itself speaks strongly for YC. I'm tempted to make a joke about startup unionization.
- falsestprophet 17y agoIn general, is maintaining a good reputation an adequate incentive for VC firms to avoid abusing founders or angel investors?
- pg 17y agoEmpirically, very much so. Stories of investors maltreating founders are not uncommon in the startup world generally, but they are extremely rare among the YC alumni.
- newy 17y agoCreating this "repeat player" effect is awesome. Sometimes the best-drafted legal provisions can have loopholes. This kind of leverage makes everything much simpler.